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State to suffer from fuel costs

WHILE the leap in the price of oil is good financial news for the WA Government, its overall affect on WA is not likely to be positive.

In the past financial year WA’s oil exports have risen in value by nearly 100 per cent.

According to WA Government budget papers, WA’s petroleum royalties rose from $177 million to $338 million.

This financial year the Government’s estimated royalty take is tipped to rise to just $383 million.

The estimate is based on an oil price of US$22 a barrel and prices are closer to US$30 a barrel.

The Government receives about $17 million for every US$1 per barrel over a year, so if the oil price stays at its present level it would receive about $510 million in petroleum royalties.

Besides the Government’s revenue windfall economic benefits flow from local oil companies’ greater profits.

There is also the likelihood of greater investment in WA’s oil and gas sector. However, there is no guarantee the oil price will stay so strong through the year.

And the WA Government only keeps about 10 per cent of all of royalties it receives.

Some goes to the Federal Government but most is redistributed to other States through the Federal equalisation system.

While the WA Government receives its reduced petroleum windfall, there is also a lot of pain being felt through the business community.

Small businesses that rely on mobility for their businesses face higher costs due to the price of fuel.

Truck drivers are suffering due to the combination of high fuel costs and reduced cartage rates.

The fuel price is also forcing up the price of goods on shop shelves.

Chamber of Commerce and Industry economist Nicky Cusworth said on balance WA would be worse off.

“In the long-term prices adjust but in that adjustment there will be a lot of trauma,” Ms Cusworth said.

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